The insiders and the institutions buy Attach (NASDAQ: FAST) and there is more than one reason to be bullish on the stock. The number 1 reason right now is the upcoming dividend declaration and payout expected in January 2023. If the company follows the trend and increases the dividend as expected it will mark the 25th consecutive dividend increase for this company. It’s a feat that will attract long-term oriented buy-and-hold dividend seekers, but there’s more. At 25 years, the number of increases qualifies Fastenal as a Dividend Aristocrat and entitles it to all the associated benefits.
The salient point here is that this high-quality blue-chip dividend growth stock is about to be included in one of, if not the most watched, tracked and copied dividend indices on the planet, and ownership is going to expand because of it. Not only will retail investors tracking the Aristocrats get interested, but all those ETFs and funds tracking the Aristocrats will have to start buying as well. What this means is a strong tailwind for share prices to keep up with the safely growing dividend.
The seller side buys the attachment
The sell side of the market, including insiders, institutions and analysts, are either buying or holding Fastenal at this time, and the bias for stock prices is to the upside. The insiders only own 0.4% of the company, but their activity is very telling. Apart from a VP who made the only sale of stock in 2022, there are half a dozen insiders including 3 directors, CEO, CAO and an EVP who have bought in the last 3 quarters. The single sale was for about $1.3 million, which is a fraction of the market and offset by institutional activity.
The institutions have been net buyers in 8 of the last 9 consecutive quarters and now own more than 78% of the shares. Major owners include Vanguard, BlackRock, State Street and Bank of New York Melon which together control about 30% of the company. The analysts are less good at the name, but even they keep it. The consensus among the 7 analysts with current research is Hold with a price target of $51.86. There has been a little movement in the 2022 price target, very little, but it is flat in 30, 90 and 365-day comparisons, and sentiment is also holding steady.
Is Fastenal’s dividend worth it?
Fastenal isn’t a cheap stock at 27X its earnings, but it pays about twice the dividend of the S&P 500 and is growing its distribution. The yield is around 2.4% in 2022 and the CAGR is also impressive, but investors should expect it to decline in the coming years. The CAGR is close to 15% with a payout ratio of almost 65% which suggests smaller increases are on the way. Still, the outlook for payout and growth is attractive relative to its peers, although there are some trade-offs to be found. WW Grainger and Simpson Manufacturing both offer better value but pay half the yield or less. However, WW Grainger is a Dividend King and Simpson brings healthier prospects for sustained long-term distribution growth.
The technical view: The fastening device bounces off the support
The price action in Fastenal has corrected from its post-pandemic peak and is now trying to establish a support base. The price action bounced off the key support level of $45 already and may now find support at the higher $51 level. In this scenario, the stock should continue to build support as it nears its next dividend announcement. If not, price action could pull back to the bottom of the support area near $45 before bouncing strong enough to move up and above the $53 level.